INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY

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					INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY
Political Science 186 Global Studies 123

I. Introduction – Conceptual and Analytical Issues
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1. What is International Political Economy? 2. What are the issues?
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A. Actor behavior B. System governance C. Globalization

I. Introduction (cont’d)
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A. Actor Behavior. How do we explain and evaluate the actions of states?
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1. Levels of analysis: international (structural, systemic) vs. domestic 2. State (government, public sector) vs. society (markets, private sector)

I. Introduction (cont’d)
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B. System Governance. Formulation, implementation, and enforcement of rules; promotion of cooperation; management of conflict
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1. Governance without government; governance mechanisms (regimes) 2. Organizing principles: automaticity, supranationality, hegemony, pluralism (negotiation, cooperation)

I. Introduction (cont’d)
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C. Globalization. Inter-national vs. globalized model of world economy

II. Analytical Perspectives on Political Economy
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1. Liberalism 2. Realism (statism, economic nationalism, mercantilism) 3. Marxism (structuralism, historical materialism)

II. Analytical Perspectives on IPE Liberalism
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A. Focus: individuals, households, enterprises B. Nature of economic relations: harmonious; interests reconcilable C. Relationship between economics and politics: economics drives politics

II. Analytical Perspectives on IPE Realism
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A. Focus: states B. Nature of economic relations: conflictual (zero-sum game) C. Relationship between economics and politics: politics drives economics

II. Analytical Perspectives on IPE Marxism
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A. Focus: classes, social forces B. Nature of economic relations: conflictual (zero-sum game) Relationship between economics and politics: economics drives politics

III. Alternative Perspectives on Globalization
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1. Definition: a broadening, deepening, and acceleration of interconnectedness of states and markets; networks of connections at intercontinental distances 2. Alternative views: from “hyperglobalists” to skeptics 3. Why do we care? By creating a dissonance between the jurisdiction of states and the domains of markets, globalization problematizes governance: who is in charge?

III. Globalization (cont’d)
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4. Perspectives on causes and consequences
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A. Liberalism: triumph of markets; good for economic welfare B. Realism: product of state policy; bad for power of states C. Marxism: triumph of markets; bad for poorer states and disadvantaged classes

IV. International Economic History – Nineteenth Century
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1. Three major developments 2. Political economy issues 3. Key lessons

IV. Nineteenth Century - three major developments
A. Monetary system: classical gold standard B. Trading system: movement toward free trade in 1860s-70s, then back toward protectionism C. Core-periphery relations: rise of “new imperialism” after 1870s

IV. Nineteenth Century - political economy issues
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A. Gold standard: What accounts for its stability and relatively smooth operation? B. Trade: What accounts for the free trade movement in the 1860s-70s? What accounts for the subsequent return to protectionism? C. Core-periphery relations: What accounts for the “new imperialism?”

IV. Nineteenth Century - key lessons
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A. No single (mono-causal) explanations; need to sift the evidence. B. No single rule for all regimes; different governance mechanisms can exist side by side

V. International economic history – interwar period
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1. Major developments
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A. Breakdown during World War I B. Attempted reconstruction during 1920s C. Renewed breakdown (Great Depression) during 1930s

V. Interwar period (cont’d)
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2. Political economy issue: What explains the failure of the attempted reconstruction?
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A. Liberalism: markets failed because of wrong-headed government policies B. Marxism: internal contradictions of capitalism C. Realism: absence of effective governance (theory of hegemonic stability)

VI. International economic history – postwar period
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1. Major developments
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A. Creation of new international institutions: IMF, World Bank, GATT B. Cold War, leading to two separate blocs (EastWest) and the rest (Third World) C. Unprecedented economic growth D. Rise of Europe, Japan; East Asia; China E. Globalization F. Increased instability after 1971-73

VI. Postwar period (cont’d)
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2. Political economy issues
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A. What explains the origins of the postwar system? B. What accounts for the relative success of the system before the 1970s? C. What accounts for the increased instability after 1971-73? D. What can be done to manage the system in the future?

VII. International Trade
1. Basic issue: a tension between desire for material benefits of an open system and pressure to promote/defend state and/or particularist interests
a. Advantages of free trade: efficiency, growth b. Disadvantages of free trade: dependence, losses to key constituencies c. Collective action problem: how to manage the basic tension

IV. International Trade (cont’d)
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2. Postwar experience: GATT/WTO
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a. Purposes: liberalization, dispute resolution b. Principles: non-discrimination, reciprocity, safeguards

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3. Protectionism (actor behavior)
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a. Instruments of trade policy b. Arguments for protection c. Practical motivations

VII. International Trade (cont’d)
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4. Managing the system (system governance)
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a. b. c. d.

Promotion of liberalization Dispute resolution Safeguards Other current issues

VIII. Money and Finance
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1. Basic issue: as with trade, a tension between desire for the material benefits of an open system and pressure to promote/defend state and/or particularist interests
2. Basic concepts
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a. Balance of payments; deficits b. Financing: reserves, borrowing, liquidity c. Adjustment: the “Three D’s,” “Unholy Trinity”

VIII. Money and Finance (cont’d)
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3. Postwar experience
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a. IMF, Bretton Woods system b. Financing/liquidity: US dollar, SDRS, capital markets c. Adjustment: breakdown of pegged exchange-rate system d. Debt problems; financial crises

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4. Managing the system
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a. Exchange rates b. International capital mobility

IX. Regionalism
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1. Basic issue: between the national and global levels, regionalism can complicate the issue of system governance 2. Trade Regionalism (regional trade agreements)
3. Monetary regionalism (monetary unions, etc.)

IX. Regionalism – Trade (RTAs)
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a. Types of RTAs b. Advantages and disadvantages
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i. For individual countries ii. For overall system (trade creation, trade diversion) i. First wave: 1950s-60s ii. Second wave since 1980s

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c. Postwar experience
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d. Why the renewed interest in RTAs? e. Significance for system governance

IX. Regionalism - Money
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a. Types of monetary regionalism: horizontal, vertical b. Advantages and disadvantages c. Recent experience
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i. Precedent of the euro ii. Rise of currency competition iii. Currency regime choices today

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d. Significance for system governance

X. Economic Development
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1. The developing world: differentiated, difficult to generalize 2. Postwar rules: based on principle of non-discrimination; trade was to function as an “engine of growth” 3. Postwar experience: mixed – some success stories, many disappointments

X. Development (cont’d)
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4. Why has trade failed as an engine of growth for so many?
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a. Liberalism: market failures -- weak demand, weak linkages, weak adaptive capacity b. Marxism: natural result of capitalism exploitation c. Realism: result of power politics
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i. Role of great powers in writing the rules ii. Attempts at collective action by LDCs iii. Outcomes: partial success

X. Development (cont’d)
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5. Options for development strategies
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a. Export promotion
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i. Traditional exports  Problems: inelastic demand, protectionism  Cartels? Three conditions necessary for success: control largest part of supply; no close substitutes; agreement on the sharing of benefits ii. Non-traditional exports: manufacturing, services

b. Import substitution (import substitution industrialization – ISI)  c. Regionalism
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XI. The Environment
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1. Basic problem: the environment is a collective good, shared by all and owned by none (“tragedy of the commons”); core issue is “externalities,” which can cross borders 2. Economic functions of the environment
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a. A consumption good b. A supplier of resources c. A receptacle of wastes d. The problem: not always mutually consistent, hence a collective action problem – a system governance issue

XI. Environment (cont’d)
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3. Practical dimensions
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4. Possible solutions – approaches to governance
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a. Pollution (air, water, etc.) b. Deforestation c. Endangered species

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a. b. c. d.

Laissez faire National regulation Formal regimes Market approaches

XII. Energy
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1. Importance: the world’s single most widely traded product 2. First regime: the Seven Sisters – a classic cartel, successful because it met all three key conditions necessary for success: control of supply; no close substitutes; agreement on sharing of benefits 3. Second regime: OPEC
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a. Dramatic emergence in 1973 b. Ups and downs of OPEC power since 1973

XII. Energy (cont’d)
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4. Reasons for variations of OPEC power over time – back to the three key conditions for a successful cartel 5. OPEC’s biggest challenge: agreement on benefits (limiting free riding)
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6. Prospects
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a. Low absorbers vs. high absorbers b. Special role of Saudi Arabia

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a. Demand side (conservation) b. Supply side: exploration, technology, alternative forms of energy

XIII. Multinational Corporations
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1. Definition 2. Perspectives on the MNC 3. History
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a. Until 20th century, mostly extractive (farming, mining, etc.) b. Real growth began in 1950s, for 2 reasons
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i. European Common Market (trade diversion) ii. Decolonization (ISI development strategies)

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c. Changing sources and destination of foreign direct investment (FDI)
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i. Increasing share of FDI from developing world ii. Most FDI goes to Europe and North America, not LDCs

XIII. MNCs (cont’d)
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4. Perspective of home country
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5. Perspective of host country
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i. Advantages: profits, market share ii. Disadvantages: avoidance of taxes, regulation i. Advantages: capital, technology, management expertise, market access ii. Disadvantage: loss of control

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6. Shifting and uncertain balance of power between states and markets
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i. The obsolescent bargain ii. Production chains

XIV. Prospects for the Future
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1. Postwar period has seen major structural changes
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a. Distribution of power between states b. Distribution of power between states and markets c. Global security environment

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2. Future scenarios
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a. b. c. d. e. f.

World economic government (supranationality) Renewed hegemony (US? Europe? Japan? China?) Cooperative regimes (automaticity + pluralism) Governance by MNCs Collapse and economic warfare A “mosaic” (all of the above)


				
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